The War for Talent is alive and well. Insatiable demand for talent, coupled with limited supply, a new working paradigm and turbulent market conditions, place immense pressure on organizations to ensure their people programs are up to snuff and flexible to enough to manage through ongoing change. This dynamic creates a renewed focus on Total Rewards.
Changing Mindset from “Compensation + Benefits” to Total Rewards
It’s easy to get caught in the trap of measuring total rewards competitiveness through each of its parts. Is my employee benefits program competitive? Is my cash compensation program competitive? Is my equity program competitive? Is my remote work and employee flexibility policy competitive? These are all valid questions but fail to acknowledge that each of these components are interconnected and the sum is greater than its parts, for good or ill! Shifting to a total rewards mindset enables a clear understanding of higher-level choices and trade-offs that exist to enable flexibility and optimize program effectiveness for each company’s unique set of circumstances.
Well Designed Total Rewards Starts with the Business
As with all thoughtful people programs, Total Rewards must be grounded in the business. What is the business plan for the foreseeable future? What is the implication for results, our desired culture and behaviors that will reinforced through our human capital programs?
Establishing a philosophy that directly links to the strategy is a great place to start and should consider foundational criteria such as:
· A shared definition of success
· Clear program objectives
· Desired culture
· Market definition
· Desired competitive positioning
· Company constraints
When designed properly, the Total Rewards framework should permeate the business – from the company’s underlying job architecture, to organizational incentive design, to deliberate choices made relating to coverage and cost sharing, to performance management and differentiation.
Getting More Out of Total Rewards
Beyond philosophy and market competitiveness, there are two fundamental considerations to Total Rewards:
1. How well are the programs valued?; and
2. How much do the programs cost?
When programs are evaluated in isolation, we tend to focus on the external lens (i.e., “market” vs. internal value) and lose the concept of fungibility between elements of the total rewards program.
Given how much the world has changed in recent times (remote or hybrid work, social justice issues, generational change in the workforce, etc.) there is now a desire for control and choice by employees. How do we assign a value to our programs? This can vary from informal conversations to flash surveys to conjoint analysis. Regardless of the approach, incorporating perceived value (whether qualitative or quantitative) into the program design is a critically important input. This exercise also exposes areas where education and/or communication opportunities exist to bolster program value.
To the extent we can assign a relative value to each program, and we know the cost of running that program, it enables us to have a very different conversation around effectiveness and maximizing ROI for employees and for the company in a way that can be tailored for each situation.
Consider the following framework:
The Power of Getting Total Rewards Right
For those that “get it right,” we see significant downstream benefits such as higher employee engagement, lower voluntary turnover and higher retention rates. While there is no such thing as a perfect Total Rewards program, business alignment, external competitiveness, internal value, total spend, improved communication and a holistic viewpoint are core elements that will ensure program effectiveness, flexibility and well-spend dollars.